Your fingerprints are all over your client’s tax returns

How many documents did you create for 2024? Before you confidently say “0”, think back on the kinds of things you help your clients with ALL THE TIME:

• Contributing to retirement accounts? Form 5498
• Rolling over 401(k)s? 1099-R
• Roth conversions? 1099-R
• Qualified charitable distributions? 1099-R
• High-yield savings accounts? 1099-INT (unless it’s connected to a taxable brokerage account, and then the form could be named all sorts of things as part of a consolidated statement)
• Starting Social Security? SA-1099
• Managing taxable brokerage accounts? Some combination of a 1099-INT, 1099-DIV, 1099-B, all wrapped in something with a name like “yearend tax statement”
• Retirement income planning (pensions, IRA distributions, 401(k) distributions, TSP distributions, etc.) 1099-R

And that’s just off the cuff, nowhere close to a complete list. Every money decision has a tax impact, which is why I’m such a big fan of 1099 Letters (yearend tax summaries for your clients to remind them of the planning that you did together and the tax documents they should expect come tax time…aka right now). If you’re not already in the thick of getting a 1099 letter out, I would wait until next year to implement, but make sure you give yourself time. It needs to go on your September/October calendar, not your January calendar.

So, if it’s too late for a 1099 letter, why am I bringing this up now? Because your clients are all getting tax returns prepared in the next two months and then it’s prime time for you to get and review tax returns. For you to do that effectively, you need to understand how the planning you already do hits your clients’ tax returns. Which forms and line items should all that great work be showing up on.

A great place to start is by reviewing your own tax return and tracing all those activities through to individual line items, which conveniently is a good test of whether you are following the same advice you give to your clients. 🙂

If you’re looking to go deeper than that, you can join Micah Shilanski, CFP® and I on February 12th at 11 am PST for a CE-eligible webinar where we will draw a roadmap between common financial planning topics and the exact places on the tax return they show up. Micah and I have reviewed thousands of tax returns between us and are excited to pull back the curtain and show other great advisors exactly how this all works. Because we’re all about taking action, we, of course, will also be sharing best practices on how to communicate with your clients and their tax preparers on this important topic.

Whether you self-study or join us on the 12th, this is a far too important topic for inaction.

Happy Tax Planning!